HARTFORD, Conn. (Legal Newsline) -Mutual of Omaha has agreed to a $1.7 million settlement with the Connecticut attorney general to end an investigation into the commissions the company paid to pension plan brokers.
Connecticut Attorney General Richard Blumenthal says Omaha, Neb.-based Mutual illegally paid more than $1 million in concealed compensation to its pension plan brokers since at least 1999.
The company will also pay a $195,000 civil penalty to Connecticut, under the agreement announced Wednesday.
The attorney general's investigation focused on single premium group annuities (SPGA) that some pension plans use to fund their payments.
Blumenthal says the pension plans typically rely on brokers to evaluate and recommend annuities because of the complexities involved.
The additional compensation brokers received influenced their recommendations, he said in a statement.
"Mutual paid illegal secret payments - lucrative incentives for brokers to funnel customers to Mutual. These hidden payments were disguised as 'expense reimbursements' and 'administrative costs,'" Blumenthal said.
"In reality, these hidden payments to brokers were loaded into premium costs for private and public pension plans nationwide, and skewed the market to favor only the select carriers who provided these illegal payments," the Democrat added.
As a part of the settlement, Mutual has also agreed to:
-impose an eight-year ban on any broker compensation apart from the disclosed commissions for SPGA business;
-provide written disclosures to brokers and customers in its initial SPGA proposals - prior to binding - of all compensation paid to the broker, and receive written consent from each customer to such terms;
-post a disclosure on its website - in a format to be approved by Blumenthal's office - of its compensation practices and policies;
-implement written standards of conduct regarding compensation and commissions paid to brokers, and appropriate employee training.
From Legal Newsline: Reach reporter Chris Rizo by e-mail at firstname.lastname@example.org.